AND SERVICE TAX: A STUDY OF IMPACT ON INDIAN ECONOMY AND COMMON MAN
* Shivam Agnihotri
** Vaishali Kajaria
Dept. of Accountancy & Law
Educational Institute, Agra (India)
The GST also Known as Goods and Service
Tax is said the biggest tax reform in indirect tax since 1947. However, the
idea of GST in India was mooted by Vajpayee Govt. in 2000. It was supposed to
implement from April 2010 by UPA Govt., but due to political issues it was not
implemented at that time. The GST is came into force from 1st July
2017 and levied on manufacture, sale and consumption of goods and services in
India. GST is designed to support and enhance the economic growth of India and
more than 150 countries have implemented GST so far. The Basic aim of GST is to
avoid cascading effects of taxation and make single tax system for the
manufacturing and selling of goods at the both central and state level in the
country. The GST is mainly implemented to remove all other indirect taxes like
VAT (Value Added Tax), Excise duty and Service tax. It is expected to reduce
cost of production and inflation in the economy, thereby making the Indian
trade and industry more competitive, domestic as well as internationally. GST
is also very much helpful for the consumers in the aspects for payment of taxes
as all consumers or common man was paid separate tax at state level and central
level for goods and service purchased and consumed, now after GST there is only
one tax is paid for goods and services consumed. This Paper is attempt to study
positive and negative impact of GST on Indian economy and common man through
various aspects. The present study is based on secondary data. The data is
extracted from various sources such as research articles, working papers,
magazines, annual publications and various authenticated websites.
Key Words: Goods
and Service Tax, Indian Economy, Common man, Indirect tax system, Impact of
GST, Indirect tax reform, GST rates
Taxation plays a
very important role in economic development of country. A good tax system
should keep in view issues of income distribution and, at the same time, also
generate tax revenues to support government expenditure on public services and
infrastructure development. GST known as Goods and Service Tax levied by the
government to replace all indirect taxes and make uniform indirect tax system.
In India, the idea of GST was contemplated in 2004 by the task force on
implementation of the Fiscal Responsibility and Budget Management Act 2003,
named Kelkar Committee. The Kelkar Committee was convinced that a dual GST
system shall be able to tax almost all the goods and services and the Indian
economy shall be able to have wider market of tax base, improve revenue
collection through levying and collection of indirect tax and more pragmatic
approach of efficient resource allocation. Under the Goods and Service Tax
system, every person is liable to pay tax on output and entitled to enjoy
credit on input tax paid and tax is levied only on the amount of value added.
GST is levied and collected at each stage of sale or purchase of goods or
services based on input tax credit method. Under this system, GST-registered
commercial houses is entitled to claim credit of the tax as they paid on
purchase of goods and services as a part of their day to day businesses. GST
removes “Tax on Tax Effect” and also prepared a common national market for
Goods and Services under Single Umbrella Tax Rate which harmonized indirect
taxes being levied by Union and State Governments. The reference of GST was first
made in the Indian Budget in 2006-07 by the then Finance Minister Mr. P.
Chidambaram as a single centralized Indirect tax. The Bill was introduced on
December 19, 2014 and passed on May 6, 2015 in the Lok Sabha and Passed in
Rajya Sabha on 3rd August 2016. The GST was levied in India from 1st
July 2017 on the place of all indirect taxes such as Excise Duty, Service Tax
and Value Added tax etc. by Central and State Government separately. Most of
the countries followed unified GST while some countries like Brazil, Canada
follow a dual GST system where tax is imposed by central as well as state
government both, similarly India GST mechanism is also followed dual GST system.
Under GST system goods and Services fall under five categories: 0%, 5%, 12%,
18% and 28% through comprehensive tax imposition system. The luxuries items are
come under the category of 28 % tax bracket and normally common use items are
come under the category of 5%, 12%, and 18% brackets and goods and services
which are not taxable in nature as per provisions of GST is fall under the
category of 0% tax bracket. The GST Council in its 23rd meeting on November 10, 2017
recommended widespread changes in the Goods and Services Tax (GST). The council
has decided to keep the highest 28% tax on luxury and sinful items, as a result
177 items has been shifted to the 18% bracket from 28% bracket. GST on many
items has also been reduced in this meeting. For corporate, the elimination
of multiple taxes are improved the ease of doing business and from the common
man point of view, the biggest advantage would be in terms of a reduction in
the overall tax burden on goods, which was estimated to be around 25%-30%.
REVIEW OF LITERATURE
Ehtisham Ahmed and Satya Poddar (2009) have
studied, “Goods and Service Tax Reforms and Inter-governmental Consideration in
India” and found that GST introduction will provide simple and transparent tax system with
increase in output and productivity of economy in India. But the benefits of
GST are critically dependent on rational design of GST.
Dr. R. Vasanthagopal (2011) has
studied “GST in India: A Big Leap in
the Indirect Taxation System” and concluded that switching to seamless GST from
current complicated indirect tax system in India will be a positive step in
booming Indian economy. Success of GST will lead to its acceptance by more than
150 countries in world and a new preferred form of indirect tax system in Asia
Pinki, Supriya Kamma and Richa Verma (July 2014) have studied,
“Goods and Service Tax- Panacea For Indirect Tax System in India” and concluded
that the new NDA government in India is positive towards implementation of GST
and it is beneficial for central government , state government and as well as
for consumers in long run if its implementation is backed by strong IT
Dr. Shakir Shaik, Dr. S.A. Sameera and
Mr. Sk. C. Firoz (2015) have studied
“Does Goods and Service Tax (GST) leads to Indian economic Development?” and
found that implementation of GST in the Indian framework will lead to
commercial benefits which were untouched by the VAT system and would
essentially lead to economic development. Hence GST may usher in the
possibility of a collective gain for industry, trade, agriculture and common
consumers as well as for the Central Government and the State Government.
and Upasana Dhanda (2015) have studied “GST in India: A
Key Tax Reform” and concluded that GST will give India a world class tax system
by grabbing different treatment to manufacturing and service sector. But all
this will be subject to its rational design and timely implementation. It will also lead to
higher output, more employment opportunities and flourish GDP by 1-1.5%.
Dr. Pradeep Chaurasia, Shweta Singh
Prakash Kumar Sen (2016) have
studied “Role of Goods and Service Tax in the growth of Indian Economy” and
concluded that Overall GST is helpful for the development of Indian economy as
well it will be very much helpful in improving the gross domestic product of
the country more than two percent. Now the government of India should take
final step to pass the GST bill in parliament with removing all hurdles.
Sankar R (2017) has
studied the “GDT: Impact and Implications on various Industries in Indian
economy” and concluded that GST is very crucial tax reform since independence
of India, so it must be better handled with utmost care and analyzed well
before implementing it. And, both central and state governments have to conduct
awareness programs and various literacy programs about GST to its various
Anita Modi (2017) has studied “Impact of GST on Common
Man” and her study is concluded that GST will ensure a comprehensive tax base
with minimum exemptions, will help industry, which will be able to reap
benefits of common procedures and claim credit for taxes paid. GST, as per
government estimates, will boost India’s GDP by around 2 per cent.
MOTIVATION TO THE STUDY (RESEARCH
Various studies have been carried on pre
implementation era of GST in India. So, most of the studies are hypothetic in
nature. Now the GST is came into force since 1st July of 2017, so
this has enhance the curiosity to study the actual impact of GST on Indian
Economy as well common man, because both are directly or indirectly effected
with each other. So, researcher is intend to study about the actual concept, mechanism
and impact of Goods and Service Tax.
OBJECTIVES OF THE STUDY
Study the concept of Goods and Service Tax.
study the impact of Goods and Service Tax on various industrial sectors.
Study the impact of Goods and Service Tax on pricing of product and Common Man.
Study the impact of Goods and Service Tax on Indian Economy.
study the various advantages and challenges of Goods and Service Tax with
special reference to Indian scenario.
study in this research paper is based on secondary data which extracted from
various sources such as articles, research papers, international and national
publications, periodicals, newspapers, magazines, govt. publications and authenticated
websites. As per the objectives of the study descriptive type research design
is adopted to have more accuracy and rigorous analysis of research study. The
accessible secondary data is intensively used for research study. The study is
used the exploratory technique to find the objective of the study.